October 3, 2011
New York, Opinions

Scuttled wind farm project was a billion-dollar boondoogle

By David Robinson, The Buffalo News, www.buffalonews.com 2 October 2011

It was pretty clear all along that building a wind farm in the waters of Lake Erie or Lake Ontario would be way too expensive.

What we didn’t know until last week was that it wouldn’t just be way too expensive: It would have been a boondoggle of epic proportions.

When the New York Power Authority formally pulled the plug Tuesday on the offshore wind farm project, NYPA officials said it wasn’t “fiscally prudent” because even a 150-megawatt project – on the small side of the agency’s guidelines–would require subsidies of $60 million to $100 million a year. That was two to four times the subsidy a similarly sized land-based wind farm would require to be economically feasible.

“A larger project would just yield a larger subsidy,” said Jill Anderson, the Power Authority executive who delivered the report recommending that the project be scuttled.

But the subsidy wouldn’t have just lasted for a year or two. NYPA would have paid them for 20 years. So on even a small-scale project, it would have cost $1.2 billion to $2 billion in subsidies over 20 years just to make the project work financially.

Anderson was being polite in saying it wasn’t fiscally prudent.

It would have been a huge boondoggle. And a bigger project would have been an even bigger boondoggle.

The Power Authority would have paid the subsidies through the power purchase agreement it would have signed with the company it chose to develop the wind farm. Any developer would need the power purchase agreement to get financing for the project, and the authority would subsidize the wind farm by agreeing to pay prices that were way above the market rate for the electricity generated by the offshore turbines.

Now, to be fair, no renewable energy projects, from solar panels to wind farms, can compete on cost with traditional energy sources, such as power plants that run on coal or natural gas. But those conventional sources also are a big source of pollution and rely on fossil fuels. Paying a premium for new sources of clean energy does make sense in the long term.

The question is how much more.

Power Authority officials said they tried to make the Great Lakes project work. They looked at a smaller, pilot-sized project. They considered building the project in phases. Nothing could make the numbers come close to working.

“Economics are driving this one,” said Eugene L. Nicandri, a Power Authority trustee.

Supporters of the wind farm project said it could have helped make New York—and job-starved upstate in particular—a leader in the offshore wind energy market, with local companies developing the skills and expertise to make many of the 8,000-odd components that go into each turbine.

“NYPA focused on the cost, but not the benefits,” said Chris Wissermann, the managing director at Great Lakes Wind Energy, an Ohiobased company that made one of the five proposals to build the offshore wind farm.

“It’s a lost opportunity for New York,” said Wissermann, whose company had proposed a project of less than 100 megawatts. “These projects, at this point, are really closer to economic development projects than energy projects.”

Of course, we heard the same argument five years ago, when the state was looking at a$1.5 billion project to build a cutting-edge coal-fired power plant that would vastly reduce its harmful emissions at the Huntley Station conventional coal-burning plant in the Town of Tonawanda. The idea then was the project would make New York—and Western New York in particular—a leader in clean coal technology, potentially spawning a whole new industry here.

Then, as with the offshore wind farm today, the clean coal dreams came to naught because it came up short on the most crucial question of them all: power and jobs vs. price and the environment.

“The value of that estimated economic activity has to be weighed against the cost borne by customers,” NYPA’s Anderson said.

Power Authority trustees, wanting to put a positive spin on the demise of the Great Lakes venture, took pains to note that, as the upstate project dies, it is launching a new push for a big wind farm off the Long Island shore, where the demand for electricity is greater. Anderson said the subsidies for that project could be less because the market price for electricity is higher downstate.

But Brian P. Smith, the communications and program director for Citizens Campaign for the Environment in Buffalo, said that downstate project will take years—maybe even a decade— to come together. By then, other states will have gained the first foothold in the offshore wind energy industry that he had hoped would get a start here.

“This does nothing to appease the supporters of a clean energy future in New York.” Smith said. “It’s a huge step backward for upstate and a tiny step forward downstate.”

Even then, you still have to wonder if the costs still won’t outweigh the benefits.

URL to article:  https://www.wind-watch.org/news/2011/10/03/scuttled-wind-farm-project-was-a-billion-dollar-boondoogle/